MID-YEAR 2019 RIAA MUSIC REVENUES REPORT Joshua P. Friedlander | Senior Vice President, Research & Economics, RIAA In the first half of 2019, the U.S. recorded music market continued the overall trends and double digit growth rates of 2018. Revenue increases were driven by the number of paid subscriptions exceeding 581 million for the first time. Total revenues grew 18% to $5.4 billion at retail in the first half of 2019. Streaming music accounted for 80% of industry revenues. At wholesale value, revenues rose 16% to $3.5 billion. FIGURE 1 FIGURE Streaming Paid subscriptions alone made up 62% of overall industry Revenues from streaming music grew 26% to $4.3 billion revenues, and they accounted for 77% of U.S. streaming for the first half of 2019. This broad category includes music revenues for the first half of 2019. revenues from subscription services (such as paid versions of Spotify, TIDAL, Apple Music, Amazon, and others), digital and customized radio services including those revenues distributed by SoundExchange (like Pandora, SiriusXM, and other Internet radio), and ad-supported on-demand 3 FIGURE streaming services (such as YouTube, Vevo, and ad- supported Spotify). FIGURE 2 FIGURE This category also includes $482 million in revenues from “Limited Tier” paid subscriptions (for services limited by factors such as mobile access, catalog availability, on-demand limitations, or device restrictions). Services like Amazon Prime, Pandora Plus, and other subscriptions are Paid subscriptions continued to be the biggest source included in this category. This category grew slightly as a of revenue for recorded music. Year-over-year growth of percentage of subscription revenues and was up 31% brought total subscription revenues to $3.3 billion. 39% versus the prior year. RIAA data analysis by Joshua P. Friedlander, Senior Vice President, and Matthew Bass, Manager The continued rapid increase in the number of paid Digital Downloads subscriptions was the biggest driver of growth. For the While streaming revenues continued to increase, revenue first half of 2019, the number of paid subscriptions to full gains were partially offset by declines in sales of digital on-demand streaming services grew 33% to 58.21 million. units. Revenues from digital downloads fell 18% in 1H That represents an average of more than 1 million new 2019 to $462 million. Individual track sales revenues were subscriptions per month over the last 12 months. (Note down 16% year-over-year, and digital album revenues this figure does not include limited tier subscriptions) declined 23%. The category accounted for just 8.6% of total industry revenues in 1H 2019, a smaller percentage than physical formats. FIGURE 4 FIGURE FIGURE 6 FIGURE Advertising supported on-demand revenues for music grew 25% year-over-year to $427 million, but still only accounted for 10% of overall streaming revenues. This category Physical Products includes services like YouTube, Vevo, the ad-supported Net revenues from physical products bucked the recent versions of Spotify, and other similar services that according trend in unit sales and grew 5% to $485 million in 1H to reports from Nielsen and Border City streamed hundreds 2019; however, this growth was the result of a reduction of billions of songs to fans in the U.S. in 1H 2019. in physical product returns, and on a gross basis the revenues from physical product would have been down Revenues from digital and customized radio services for the period. Vinyl albums grew 13% to $224 million, but were $552 million in 1H 2019, up 5% versus the still only accounted for 4% of total revenues in 1H 2019. first half of the prior year. This category includes Revenues from shipments of physical products made up SoundExchange distributions for revenues from 9% of the industry total for the period. services like SiriusXM and internet radio stations, as well as payments directly paid by services, included in PLEASE READ THE COMMENTARY OF MITCH GLAZIER, this report as “other ad-supported streaming.” CHAIRMAN AND CEO, HERE: MEDIUM.COM/@RIAA NOTE – Note: Historical data updated for 2016 - 2018, including updated revenue accounting standards starting in 2016. Formats with no retail value equivalent included FIGURE 5 FIGURE at wholesale value. RIAA presents the most up-to-date information available in its industry revenue reports and online statistics database: https://www.riaa.com/u-s-sales-database 1Figure revised after original publication due to additional data. Original report estimated 61.1 million paid subscriptions. FOR NEWS MEDIA INQUIRIES, PLEASE CONTACT: Brendan Daly Kim Atterbury MID-YEAR 2019 RIAA MUSIC REVENUE STATISTICS United States Estimated Retail Dollar Value (In Millions, net after returns) % CHANGE DIGITAL SUBSCRIPTION & STREAMING 1H 2018 1H 2019 1H ‘18 to 1H ‘19 (Units) Paid Subscription1 43.7 58.2 33.0% (Dollar Value) $2,195.0 $2,848.6 29.8% Limited Tier Paid Subscription2 $345.3 $481.6 39.4% On-Demand Streaming (Ad-Supported)3 $342.8 $427.2 24.6% SoundExchange Distributions4 $398.6 $432.9 8.6% Other Ad-Supported Streaming5 $128.5 $118.9 -7.4% Total Streaming Revenues $3,410.2 $4,309.2 26.4% DIGITAL PERMANENT DOWNLOAD (Units) Download Single 221.1 184.1 -16.8% (Dollar Value) $269.9 $225.6 -16.4% Download Album 26.3 20.4 -22.5% $265.1 $205.6 -22.5% www.whymusicmatters.com 5.0 4.5 -10.5% Ringtones & Ringbacks $12.6 $11.2 -10.5% Other Digital6 1.1 0.9 -19.5% $13.3 $19.2 44.4% Total Digital Download Revenues $561.0 $461.6 -17.7% TOTAL DIGITAL VALUE $3,971.2 $4,770.8 20.1% Synchronization Royalties7 $131.0 $129.1 -1.5% PHYSICAL (Units Shipped) CD 18.6 18.6 0.0% (Dollar Value) $245.9 $247.9 0.8% LP/EP 8.1 8.6 6.0% $198.6 $224.1 12.9% Music Video 0.7 0.5 -31.4% $12.6 $9.3 -26.4% Other Physical8 0.3 0.2 -28.0% $4.6 $3.8 -16.1% Total Physical Units 27.7 27.9 0.8% For a list of authorized services of a list see For Total Physical Value $461.6 $485.1 5.1% TOTAL DIGITAL AND PHYSICAL Total Units9 281.3 237.8 -15.5% Total Value $4,563.8 $5,385.0 18.0% % of Shipments10 1H 2018 1H 2019 Physical 10% 9% Digital 90% 91% Retail Value is the value of shipments at recommended or estimated list price 5 Revenues from statutory services that are not distributed by SoundExchange Formats with no retail value equivalent included at wholesale value and not included in other streaming categories 6 Includes Kiosks, music video downloads, and starting in 2016 other digital music licensing Note: Historical data updated for 2018 7 Includes fees and royalties from synchronization of sound recordings with other media 1 Streaming, tethered, and other paid subscription services not operating under statutory licenses 8 Includes CD Singles, Cassettes, Vinyl Singles, DVD Audio, SACD Subscription volume is annual average number of subscriptions, excludes limited tier 9 Units total includes both albums and singles, and does not include subscriptions or royalties 2 Paid streaming services with interactivity limitations by availability, device restriction, catalog limitations, on 10Synchronization Royalties excluded from calculation demand access, or other factors 3 Ad-supported audio and music video services not operating under statutory licenses Permission to cite or copy these statistics is hereby granted, as long as proper attribution 4 Estimated payments to performers and copyright holders for digital and customized radio services under is given to the Recording Industry Association of America. statutory licenses.